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Financial Fair Play: characters and limits of an (im)perfect system

logo Uefa financial fair play


edited by Lorenzo Federici – Russo De Rosa Associati Law and Tax Firm


Financial Fair Play

Financial Fair Play, understood as a system of constraints introduced to safeguard the football system with a view to self-sustainability of individual sports clubs, today represents a limit for the development of leagues other than the Premier League. The economic differences between the English top flight and the other European championships, in fact, are increasingly clear-cut and this circumstance inevitably has repercussions on the economic capacity of the other European teams (with the exception of some isolated cases, such as, among the most recent, of Real Madrid and Paris Saint Germain) and, consequently, on compliance with the obligations imposed by UEFA with the Financial Fair Play.

This premise does not represent, nor does it want to be, an accusation of aiding and abetting by the European sporting institutions towards the Premier League, to which the merit must instead be recognized for having created the best national competition currently in circulation. In fact, this recognition is evident by observing the revenues generated by the proceeds deriving from the sale of television rights and the relative distribution among the clubs participating in the championship.

For the sake of clarity, it should be noted, for example, that for the 2021/2022 season, Norwich, who finished last in the Premier League standings, benefited from revenues of approximately Euro 116 million in television rights, while Inter , Serie A winner team, collected “only” 84 million (i.e. Venezia, which finished last in the standings, collected around 26 million euros).

It therefore becomes easy to understand how the financial situation of a club belonging to the English top flight manages to comply with the “limits” required by Financial Fair Play while supporting “significant” purchases and salaries.

The crisis of the football system

The introduction of a system of control and management of the financial situation of the football system began to become a prominent topic starting from the 90s during which the overall debt of the system, at a European level (mainly concentrated in Italy and Spain ), reached 7/8 billion euro. The sustainability of the system became increasingly at risk (the bankruptcy of teams such as Fiorentina, Parma and Perugia are proof of this) and, at first, UEFA tried to stem and limit this crisis with the introduction of the so-called. UEFA Licensing System, officially entered into force in the 2004-2005 season.

This system, the analysis of which will not find the necessary examination here, is based on a system of release of the CDs. UEFA licences, the acquisition of which is essential for the club’s participation in European competitions. The licence, which lasts for one year, is issued following verification of a series of requirements, including economic-financial ones, compliance with which has been (and still is) considered essential in order to guarantee the business continuity of the clubs.

Over time, however, this system proved to be insufficient to pursue the set objectives and the increase in debt led the Platini administration to develop a new system aimed at integrating that of the UEFA Licensing.

Introduction and evolution of FFP

The Financial Fair Play, approved in 2009 by UEFA under Platini’s management, came into force for the first time in 2011, in response to the ever-increasing debt involving the major European clubs, especially Italians, who resorted to unsustainable debt to maintain

its competitiveness at European level, having no regard for the financial health of companies. The main objective behind the introduction of the FFP was, and still is, to safeguard the long-term viability and sustainability of football, while also protecting the creditors of clubs.

On these assumptions, the FFP, as introduced, is based on a double pillar, namely:

  1. the absence of overdue payables (so-called “No Overdue Payables”) relating, in particular, to payables to other clubs, to employees as well as to the tax authorities and social security institutions; and
  2. the achievement of a balanced budget between revenues and costs (so-called “Break-even Rule”), where the revenues and costs relevant for the purposes of this balance, in essence, are mostly those prevalent in the sports business; for example, (i) revenues deriving from transactions concluded with related parties, for the part exceeding the concept of the so-called fair value, i.e. for values exceeding those that would normally be concluded with independent third parties, and purely non-football transactions, and (ii) the costs used for the development of football (female and youth), infrastructure and taxes.
    Failure to comply with these requirements/rules of conduct

could constitute, based on the seriousness and reticence of the violations, the basis for a series of European measures including, for example, the fine, the deduction of points, the limitation of the number of players to be included in the lists of participation in UEFA competitions , the disqualification from the competitions themselves and/or the revocation of a title itself.

Without prejudice to any proof of the violation and consequent commission of the relative sanction, the system, also with a view to mitigating the sanctions and encouraging the positive involvement of the offending clubs, first provided for the “conciliatory” mechanism of the so-called “Settlement Agreement”, with which, in the face of the effective ascertainment of the infringement by UEFA, the suspect club could obtain, by declaring its guilt, an agreement with UEFA which would result, in the face of a mitigation of the sanctions provided for violations recognized by the club, the assumption of certain obligations to adjust the budget.

The system thus outlined was subsequently integrated in 2015 through the introduction of the so-called “Voluntary Agreement” whose differentiation compared to the “Settlement Agreement” essentially lies in the voluntary disclosure by the individual club to UEFA of the circumstance of non-compliance with the Financial Fair Play criteria. The rationale of this instrument obviously lies in avoiding (and where not possible, further mitigating) the imposition of potential sanctions against a prospected guarantee of reimbursement of the violations declared and the procedural relief achieved in favor of UEFA itself.

The FFP, in the above version, was soon discovered to be incomplete; immediately after its introduction, in fact, it was realized that the system structured in this way did not allow for the avoidance of certain practices that can be defined as “conventionally” unfair. Among these it is certainly possible to mention:

  • the transfers of athletes concluded between clubs attributable to the same family/entity under obviously not market conditions but those of “convenience”. Without any specific reference, even today there are clubs, belonging to different leagues but attributable to the same ownership, which constantly exchange players without actually generating fair value transactions;
  • the widespread practice of the so-called “fake loans”: the clubs, which intended to buy a player, requested to conclude the transfer through the formula of the loan with the right to buy so as to be able to enter the expenditure in the budget during the following year. Among the most striking cases of recourse to this practice we can certainly mention the transfer of Mbappé from Monaco to Paris Saint Germain concluded with a loan plus the right to buy at 180 million;
  • the unregulated and undisclosed commissions incurred by clubs towards sports agents (previously identified as sports intermediaries).

Also to remedy the aforementioned problems, in 2018 UEFA, under the management of Aleksander Ceferin, again modified the regulatory system with the declared aim of promoting greater transparency in club finances, making explicit the anticipatory function of potential economic and financial crises of the system. These objectives were pursued, inter alia, through the introduction of a series of transparency obligations and club debt sustainability indicators.

Among these are the obligations:

  • to communicate (i) the transactions concluded with the clubs attributable to the same ownership, also indicating the criteria on the basis of which the transfer value was determined, and (ii) the commissions paid to agents and intermediaries;
  • to record in the current financial statements the value of the transfers finalized with the loan formula with the right of redemption by not proceeding, however, with the annotation in the subsequent financial year of the items relating to the redemption.

The Financial Sustainability Regulations

The debt control and management system introduced with Financial Fair Play was then replaced last April 2022 thanks to the introduction of the new “UEFA Licensing and Financial Sustainability Regulations” protocol. The economic crisis generated by the spread of the Covid-19 virus has, in fact, aggravated the financial situation of football clubs, focusing attention on other issues hitherto “neglected” by the licensing and FFP system, above all with a view to satisfying related creditors and to curb certain elusive FFP practices used by clubs.

In consideration of the aforementioned circumstances, which are far from foreseeable, clubs are increasingly resorting to “recoveries” through the implementation and intensification of practices “evading” UEFA bans: among these are certainly the cases of the so-called. sponsor “masked” or “inflated” arrangements and transfers completed at “non-fair market value”.

The former essentially provide for the disbursement, through companies controlled by the same ownership as the beneficiary club or companies in any other “influenced” way, of sponsorships which, in reality, through separate agreements, took the form of a loan between private individuals or sponsorships of unjustified amounts compared to the effective economic-advertising return that the sponsor could have benefited from; in fact, the FFP legislation provided for the limit of 30% of the revenue for sponsorships deriving from CDs. related parties. Without going into the merits of the matter, Manchester City was accused of this practice by UEFA, which however was acquitted by the competent authority in 2020 due to insufficient evidence.

The second practice, on the other hand, relating to transfers completed at “non fair market value”, appears to be widespread above all in transfers involving an exchange of players at a higher market value than the actual one so that, in substance, the transferring club can achieve a higher capital gain to be entered in the balance sheet.

The new system, according to what was declared by UEFA itself, has the objective, inter alia, of eliminating these flaws through the implementation of a regulatory structure based on 3

pillars (i.e. solvency, stability and cost control), tracing in many aspects what was already envisaged and in force through the licensing system and the previous FFP. The new regulation would be aimed at achieving better control management, above all, of the expenses incurred in relation to the salaries of professional footballers and of the expenses relating to related transfers.

Among the innovations introduced with the new system, in particular, the unprecedented spending limit to which the clubs will necessarily have to refer is certainly to be counted. The new rules, in fact, require clubs to comply, starting from June 2022, with a new spending limit for agents’ salaries, transfers and commissions to the extent of 70% of revenue. The regime thus introduced will be tempered by an “adaptation period” which will allow clubs to gradually adapt to this condition: 70% will in fact become fully operational starting from the 2025-2026 season and will, instead, be 90% for the 2023-2024 season and 80% for the 2024-2025 season.

The rules regulating transfers at “fair market value” are also amended: if with the FFP the related controls concerned only transfers between related parties (i.e. companies attributable to the same ownership), the new FRS extended the scope to all exchanges, without distinction. This perspective has also been implemented in terms of sponsorships, also placing sponsorships not achieved with related parties under the magnifying glass.

It should also be specified that the aforementioned limits were counterbalanced by increasing the so-called deviation threshold from the balanced budget, which currently allows clubs to record losses of 60 million in the three-year period (previously it was equal to 30 million).

The new system, however, especially with reference to the elusive practices noted above, inevitably collides with the effective probative feasibility that the competent supervisory bodies must necessarily take into consideration, highlighting the effective difficulty of objectively determining the exchange value of a footballer or the estimation of the convenience of a sponsorship.

The measures implemented, therefore, in the humble opinion of the writer, could still be insufficient, resulting in a penalty for clubs with less economic capacity and thus increasingly highlighting the differences inherent in purchasing power compared to “privileged” clubs … .especially if in the presence of a political line of UEFA that is not always coherent…for 500 million reasons…


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